The Lazy Man's Guide to 401k Fees

Ok, we're really NOT calling you lazy.  But we know you're busy.

We've heard several folks say that they really aren't sure what is included in 401k fees and fund expenses.

Well...the industry doesn’t want you to.  That’s why we routinely see fee disclosures that are 30 pages long and “explanations” written in vocabulary that most humans don’t readily understand.

Here’s the simple scoop.  There are 5 basic expenses that a 401k plan incurs on an ongoing basis.  We’ll tell you exactly what they are, in dollars, and how they are calculated.  Here’s the list with our definition of what they are (not necessarily the industry’s definition!)

1.    Fund expenses – In the Revolt plan: the lowest possible percentage charge on each mutual fund in your plan.  This cost is assessed by the funds in your plan and netted out of participant returns.  Funds express this fee as “basis points” but it’s simply a percentage of assets.  1 percent = 100 basis points.  This is the largest cost associated with your plan.

2.    Record keeping and Administration – self-explanatory, should be largely an explicit per participant fee. Total cost should be expressed in dollars; increase only with consent.

3.    Investment Advisory – In the Revolt plan:  selects funds, builds the model portfolios, monitors and reports performance.  Flat annual fee;  increase only with consent.

4.    Trust/Custody – Holds funds, executes trades, etc:  only other asset-based cost.

5.    Employee Education – In the Revolt Plan, services include custom plan identity/logo, 2 PowerPoint presentations (current employee and new hires), Web-based live seminars, customized employee booklet/forms, website design, quarterly participant updates with reports on model portfolios, retirement expense/income worksheet. – Flat annual fee for these services; increase with consent only.

For more information on the Revolt plan, check out our sample cost page here.